Making a Case for CBDC 2.0 — The Decentralized Version


The notions of Central Bank Digital Currencies have started to take flight in the last year or so, especially following China’s decision to start work on their own currency. What followed was interest from some of the world’s biggest Central Banks who began their own pilots and investigations into these digital currencies. 

The advantages are clear, and this is in love with a changing more modern world, but even though these coins may have links back to blackgang technology, there is a worry that they are missing the point with a full centralized control system. 

However, it is logical that a central bank, as the central control of money, would use new technology to help make a digital currency — that was not decentralized. But, what if it was possible to get the advantages of a decentralized cryptocurrency in a CBDC?

Igor Mikhalev, an expert principal at BCG helping clients develop business models with blockchain technologies and digital currencies and Kaj Burchardi, a Managing Director with BCG and leads the blockchain practice of BCG/Platinion globally, have put forward their proposal on a decentralized central bank digital currency. 

The next step in the evolution

Of course, there is a reason why decentralized coins have not been sought by central banks as they offer less control, but they also lose out by not having that side to them. However, Mikhalev and Burchardi suggest there could be an evolution. 

“CDBC 2.0 is the second step in the evolution of CBDCs: a new, most impactful form of money issued digitally by one or many central banks using blockchain technology, interoperable and programmable by design,” they suggest.

“Currently, the responsibility for the monetary system lies under the jurisdiction of nation-states and international agreements. For a digital currency to be adopted in any state, it must first comply with the regulations of the state. Central banks, while curious about CBDCs, are wary of digital currencies that introduce decentralization of ownership or governance, and that makes traditional centralized governance a challenging task.“

How it would work

They go on to explain:

“A CBDC 2.0 will be issued and decentrally governed (exhibit 3) either on a national or on a supranational level, across multiple jurisdictions. This implies a different set of legal, monetary, and fiscal policies, some of them automated, required to be codified and put in place across nations.”

“CBDC 2.0 will supplant the need for multiple other digital currencies intended for specific use cases such as mortgages, lending, trade finance, real estate, and so on. The CBDC 2.0 will have to be interoperable on a protocol level. Data exchange and functionality should be easily accessible and transferable from protocol to protocol.”

“CBDC 2.0 will supplant the need for multiple other digital currencies intended for specific use cases such as mortgages, lending, trade finance, real estate, and so on.”

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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